All right. Good morning. Our next presenting company, I'd like to welcome back the Gorman-Rupp Company to the Southwest IDEAS Conference. Trades under the ticker GRC on the New York Stock Exchange. As you can see from the display here, the company has a wide array of pumps that are used in multiple industries, and just recently announced a dividend increase, which is always good to hear. T o talk about the company in more detail, starting off today is Scott King, the President and CEO, and he'll be passing it off here in a little bit to Jim Kerr, who is the Chief Financial Officer. Scott?
Thank you. Good morning, everybody. I'm going to make some statements today that you should evaluate on your own, but we think are certainly the truth. Gorman-Rupp is a pump company. That's all that we do: pumps and pump systems. We're very well known in the industry as a high-quality manufacturer of products that are supported by the industry's best workforce. Our employees are incentivized only to take care of customers, and that makes a big difference within the pump industry. We're really advantaged right now by our primarily U.S.-based supply chain and manufacturing. About 25% of our sales are outside of the United States, but about 90% of our purchases occur with U.S. entities, and that's really been helpful, whether that was through COVID or on through geopolitical events that are going on right now. Our product line is highly diversified.
We manufacture a lot of different pump types. Why? The laws of physics and the type of applications where those fluids need to be moved are varied, and that means that the geometry of the pump needs to be diverse. One of the virtues of those products is that they can be sold into numerous end markets, and it's not very common that all of those markets are down at the same time, and so the company has a pretty remarkable stability. We operate a handful of brands that are very well known as niche leaders within the industry. It's a very fragmented industry. There are hundreds of pump companies around the world. It's about an $80 billion industry that gives us approximately three-quarters of a percent of the market share of the worldwide industry, but we are extremely well known for the markets that we're in.
We sell through world-class distribution around the world, and that distribution is very well trained by us and allows them, one, allows us to not have a cost structure that requires that number of people to be on board with us, but two, allows them to bring equipment that we do not manufacture into the customer base and help them round out their line cards. We have a very strong record of paying dividends. We have been paying dividends for 75 years in a row, and we just announced our 53rd consecutive year of dividend increases. For those in the room who might wonder, that is longer than I have been alive. Pretty outstanding. There are only about 50 companies in the nation that have achieved such a thing.
We've done a good job in recent years of using our balance sheet and in growing organically, and so whether it's through market share expansion or growth of the industry as a whole, introducing new products, or benefiting from some secular trends in infrastructure spending and data centers as well, we've got a lot of opportunities in front of us to continue to grow. You use our pumps every day. You probably just don't know it. If you turn on the tap here in the hotel, the water that comes through that from Dallas Water, for sure, went through our pumps. I've been to the pump station where it happens. If you flew to get to Dallas, the fuel that went through the airplane that you flew on would have gone through our pumps.
Wastewater, irrigation for crops, fuel transfer for farmers and contractors, cooling of NVIDIA's chips in data centers. There are a whole host of applications that are out there. The fire suppression in this hotel is probably supplemented by one of our fire pumps. If we're moving water from chillers or boilers to treat the air, condition the air in a hotel or in a data center, we're going to be moving that kind of water. There are a lot of specialized pumps, as I already mentioned. Some of our competition, and there are hundreds of pump companies that are out there, are divisions of larger publicly traded companies. Water infrastructure spending right now certainly does include pumps, whether that's water or wastewater or stormwater, which we're known for each of those markets.
Generally, we have good pricing stability, and because of the U.S.-based nature of our supply chains, we've been able to take market share by not having to increase prices as much as some of our competition had to overcome tariffs. Gorman-Rupp has a very storied history. In 1933, a guy named Gorman and a guy named Rupp were both unemployed. They borrowed $1,500 from a local manufacturer in Mansfield, Ohio, and it's the only money ever been put into the company. We've grown into what we are today, both organically and through acquisitions. In 2022, we made the largest acquisition in our history. We bought a fuel transfer business for farmers and contractors from the Tuthill Corporation n amed Fill-Rite, they are about 65% of farmer and contractors' fuel transfer work in North America.
If a farmer or contractor needs to put diesel in their equipment, they're doing that most often with a Fill-Rite pump. It's been a great acquisition and really confirmed that our acquisition history and criteria that we use are the ones that we should be using. The mission statement on the top right, J.C. Gorman and Herb Rupp wrote in 1933, it still means a lot to us. I'm going to read it, actually. "To provide a quality product, competitively priced, delivered on time, backed by reliable service, and a profit that provides an equitable return to our shareholders, as well as providing our employees with competitive wages and benefits." That's pretty rare for somebody to come up with in 1933. That's not what was on most people's minds. We've not changed it. We don't plan to change it.
It really has stood the test of time and is what we continue to operate on. The divisions that you see across the center of the page are world-class brands within the pump industry. Every one of them has some niche where they're a number one position within the industry. We operate in numerous facilities across the world, as noted on the bottom of the page. Because we've acquired companies over the years and have an intention to continue to be acquisitive in the pump market, we consciously have an operating model that allows our divisions to stay close to customers. The first thing we expect is everything that's on the left-hand side of this page. Our workforce sets us apart from the rest of the industry. All we expect of our employees is that they take care of customers and that they make very high-quality products.
High-quality products put into the wrong environment can still present problems, and we answer our telephones. We answer our emails, and we do so 24/7, 365. When a customer needs help, they need repair parts on Easter Sunday, we're going to be in the shop shipping repair parts on Easter Sunday. It's an emergency business. Quality products backed up by great folks who are educated. We have high degrees of product availability. We carry more inventory than most of the rest of the industry. Why? It's an emergency business. How many of you have bought a water pump for your car when you didn't need one? Doesn't happen. You've got to have the inventory to back up situations. We're very active in our communities. We're old-school ESG, if you will. We're involved in all the various civic causes that are in the locations where we operate.
We ask our division managers to stay focused and nimble on taking care of customers. The things that are in the bottom of the right-hand side of this slide, the blue items, we ask them to stay focused on. We try very hard not to distract them with the things that are in the top green section of this. We do not want to distract them with treasury or legal or benefits or cybersecurity, investor relations. It is important that we get out and talk to folks like you. We want our operating managers out taking care of customers, and we allow them to stay focused on those things. On occasion, there are some things that gray those lines, and those are in the center.
We consciously say to operating managers, we do not want to do the things that you are responsible for, and we hold them accountable to doing those things. By the way, if we ask you to do something that we are accountable for at the headquarters, please ask us to stop, and that works pretty well. When we make an acquisition, we intend for the acquisition to operate under this model. It really frees up folks to be more nimble than their competition. I mentioned product diversity. This is a very weak attempt to convey how diverse the product lines can be. Down in the bottom left, you see a fractional horsepower brushless DC mag drive pump that is used in cooling applications for things like server racks, for things like electric vehicle charging, for hydrogen fuel cells, and those kinds of things.
All the way up to on the far right, you see a pump that a lady standing in that pump is capable of handling 1 million gallons per minute of stormwater during a hurricane event. This one happens to be in the city of New Orleans or on Lake Pontchartrain Shore, near New Orleans. We make things that are almost everywhere in between, and we strive for each of those products to have a kind of a number one position within the industry for solving a particular problem and not having a close second. Many and almost all of them do. One of the virtues of those products is they can be applied across numerous markets. We'll delve into those markets. One nice thing about it is it's rare that all these markets are down at the same time. Right now, our incoming year-to-date is up 9%.
The only market that is not up in incoming is the construction and dewatering market. The rest of them are all on an upswing. From an international standpoint, about 25% of our sales last year were outside of the U.S. Prior to acquiring Fill-Rite, about a third of our sales were international. Fill-Rite was very U.S., North American-centric, and that we did not have a problem with. We actually liked it, but we also see it as an opportunity for us to continue to expand legacy Gorman-Rupp brands internationally and the Fill-Rite brand internationally. You can see the mix on the right-hand side of the slide. That is a pretty diverse mix of end markets. Additionally, you might note that roughly half of the international sales are exported from our U.S. sites, and about half of that come direct from our international locations, which we have a handful of.
We sell almost exclusively through distribution. Why? We couldn't afford that sales force worldwide for all of the markets that we have. Two, those distributors need marquee products on their lines to complement the other products that they would sell into those markets that aren't pumps, and pumps is really what we do. We have some expectations of that distribution and manage them very, very carefully. One, they have to have bricks and mortar. Two, they have to stock inventory and have a very capable and trained sales force. They have to be able to service our products, and we train them on how to do that. They have to have sufficient capital to do all of those things. Plus, we ask them to have a plan to focus on Gorman-Rupp.
The territory that we're going to grant them, we're going to protect them in for the market that they're good at, and we hold them accountable to sales performance in those channels. Fill-Rite brought some retail and e-commerce sales to us. About half of Fill-Rite's sales go through folks like Amazon or Tractor Supply or those kinds of things, and that's been a good addition to the product line. I'm going to turn things over to Jim Kerr, our CFO, for some comments on the financials.
Good morning. I'll go through a brief financial overview, talk about our capital allocation priorities, then turn it back over to Scott, who'll talk a little bit about our growth initiatives, and then we should have a few minutes at the end here for questions as well. We've had some nice top-line and earnings growth over the last four years, about 90% growth during that four-year period. It's split about half from the large acquisition we did, Fill-Rite, and about half from organic growth. In terms of the acquisition, it was mid-2022 when we acquired Fill-Rite, manufacturer and sale of fuel transfer pumps. What we liked about Fill-Rite, the quality of their products fit in with the rest of our portfolio. They had a strong number one brand position in the markets that they served.
They had very good margins, actually gross margins a little bit better than our legacy Gorman-Rupp business. They had a history of growth, which was nice, and they filled a niche that we didn't have. When we look at our acquisition criteria, that's what we're looking for. As Scott mentioned, Fill-Rite really met all that acquisition criteria that we had set out. On the organic growth side, 2022 and 2023, we had an organic growth of about 15% in each of those years. If you recall, those are the years coming off of COVID. We've learned from prior downturns that when things turn, they turn pretty fast. During COVID, our approach was we maintained our employees, we maintained our inventory levels, we continued our R&D pipeline. When things turned, we were well-positioned to take advantage and gain some market share, which we did.
As a result, earnings grew as well. The $1.75 in 2024 was a record. I'll talk about how we're doing so far in 2025 here in a few slides. With our sales growth, adjusted EBITDA has also grown nicely. We've increased adjusted EBITDA by 2.5x where we were in 2020. Of that $75 million increase, about 60% of that has been from organic growth and about 40% from Fill-Rite. $125 million in adjusted EBITDA in 2024 represents about 19% of sales. A nice trajectory there as well. So far in 2025, through three quarters, sales are up about 3.8%. We've seen strength in the majority of our markets, including the municipal market, which continues to benefit from infrastructure, and we've also seen some nice growth in the industrial market.
We did take a one-time charge in Q3 of this year of about $3 million. We decided to do some facility optimization at our National Pump Company. They're in the ag business. They operate out of six branches. We did some analysis that showed we could maintain the same level of sales, but with three less branches. We closed two facilities, repurposed one of those facilities to our Patterson division. The reason we did that, Patterson's really had some nice growth both in municipal, fire, and HVAC, so it was good to move that production capacity and give them that space. That change should save us about $2.5 million in costs going forward on an annual basis. Excluding that one-time charge, operating income's up about 4.4% year-to-date, but if you look at EPS, EPS is actually up about 19%.
We're getting a nice benefit from an interest expense reduction, which I'll talk about here in a couple of slides. Scott mentioned incoming trends in our backlog a little bit, but our incoming has continued to be strong. In 2024, we had incoming up about 7%. Year-to-date 2025, incoming's up actually over 10%. All of our markets are showing growth on the incoming other than the construction market. That strong incoming has really helped us increase our backlog. Our backlog sits at the end of Q3 at $234 million. That's a $28 million increase from where we sat at the end of 2024. It really positions us well as we head into Q4 and into 2026. Leverage, Scott also mentioned we were pretty much debt-free before we bought Fill-Rite. I mentioned the reasons.
We felt strongly about making the Fill-Rite acquisition in addition to how it fit our acquisition criteria. Even though we were going to take on some debt, we knew based on our history of cash flow, Fill-Rite's strong cash flow, that we'd be able to delever pretty quickly. You can see out of the gate, 4.9x leverage, and since then we've brought that down consistently quarter over quarter down to 2.4x at the end of Q3. We paid down $43 million in debt in 2024, and so far in 2025 have paid down another $45 million in debt. The combination of our EBITDA growth and the debt paydown has allowed us to improve our leverage significantly. Just a little bit on our debt, how our debt is structured. When we first bought Fill-Rite with that high leverage, we had to take on some higher- interest debt.
Two years after the acquisition, with our leverage improved, we were able to refinance that debt. As we sit now, we have a senior term loan and a little bit of private placement notes as well. This restructure really allowed us to save a lot of interest expense by eliminating that high- interest debt. That, combined with the amount of debt we've been paying down, has really given us a nice tailwind on the interest expense line, and that should continue into 2026 as we pay down debt. From a capital allocation standpoint, on the left is our history. Our first priority has been to invest back in the business through CapEx, usually about $20 million a year. It's mainly in machinery and equipment, although a lot of times that's replacing existing machinery and equipment. It gives us more automation, more capacity. It's more efficient.
A lot of times can run unmanned, so it's really been a nice benefit to us and part of how we've been able to leverage that growth that I talked about earlier. Secondly, as our dividend, we continue to pay a dividend, and I'll have another slide on that here in a second. We talk about our dividend track record. Third is to deleverage. I talked about so far how we've gone from 4.9 down to 2.4. Our goal is to continue to delever here in the short term, but we're getting close to the point where we're going to be comfortable enough that our leverage is low enough that we can begin to look for another acquisition. If we do another acquisition, we don't expect our debt to go back to where it was. That was a one-time thing with Fill-Rite.
If we did another acquisition, I would expect our debt levels after an acquisition to not exceed 3.5x , which would be a very comfortable level for us given our cash flows. On the right, going forward, really the priorities are consistent with what they've been historically. Invest back in the business, pay a dividend, and continue to pay down debt. In terms of dividends, Scott mentioned as well, but 53 consecutive years of increased cash dividends puts us in one of the top 50 companies in the U.S. that have that type of track record, something we continue to be proud of and would expect to continue. Turn it back over to Scott to talk about some of our growth strategies.
Thank you, Jim. We do have a mindset for growth, and there's a lot of opportunity within the industry. First, there's an overarching principle for us, and that's that we know if we don't take care of the customers that we have, then another pump company's going to take care of them. We incentivize our employees to just do that, make high-quality products, and be certain that customers are satisfied with them, even maybe when a customer makes a mistake. That high-performing culture of focusing on customers, and our employees know they're the ones with the money. When the customers share the money with Gorman-Rupp, we have over 90 years of profit-sharing history with our employees.
My favorite day at Gorman-Rupp is when we announced what the annual profit-sharing is at the holiday party at each of the divisions, and all 1,450 of our employees worldwide participated in profit-sharing for their division. We like to develop our employees. We like to take good care of them. We have strong safety records. We're very involved in our communities. We expect to continuously improve the business. That's part of our expectations for employees is they're not just coming to work each day thinking about getting their work done. They're thinking about how that work can be done more efficiently and more focused on a customer. I'm really grateful that we have rock-solid governance. I don't lay awake at night and worry about whether or not our results are accurate. We've done a good job of organic growth in recent years. We've expanded our market share.
We're certainly benefiting from some conditions in infrastructure spending. We're certainly benefiting from some trends in data center construction. We're benefiting from the tariff and geopolitical environments with our U.S.-centric supply chains. We've done a good job of introducing new products into the market to satisfy our customers further, and we have international growth continued to be in our sights. Our factories operate as competitive weapons. They're well invested in. We take good care of our folks. We have high levels of product availability. We continue to invest in the business. Jim mentioned about $20 million or $22 million a year. We're investing heavily in customer-facing technology to be certain that we're easy to interact with and that the information customers need to select our pumps and take good care of their own products that they do buy from us is good. We lead the industry in technical expertise.
Our crews volunteer in the Hydraulic Institute, which is the Pump Industry Manufacturers Association, and actually lead standard setting within the industry and have done so for many decades. As we've done a good job in servicing the debt related to Fill-Rite, we will turn our sights at some point back to acquisitions. We have some pretty good criteria for which we believe the next acquisition should be evaluated by. Why do we think they're good? They're the criteria we used to evaluate Fill-Rite, and Fill-Rite's been a great acquisition. It should be a pump company. That's generally what we do. Maybe a little bit of vertical integration if we strayed from that. It should be products that we don't have within the family, and there are a lot of pump types we don't manufacture.
It should be products that are sold into markets that we're familiar with and we're familiar with a lot of markets. I hope I've conveyed that culture is really important within Gorman-Rupp. That's part of why we're able to continue to grow and succeed, and our employees are interested in doing the things that help make us money. The culture of what we acquire should match and fit in well with that. I think we'd prefer a U.S.-based company. We certainly would consider a solid one in Europe as well. From a competitive standpoint, that product and that business needs to have a leading niche within the industry and be very well respected by its customers, have sticky relationships, and be financially performing. From a size standpoint, I think we'd be comfortable with something up to $150 million in revenue. This says $25 million-$150 million.
We really learned that focusing on a $10 million or $15 million acquisition is a lot of work and really does not deliver a lot of benefit to the organization. We would probably skew toward the larger size of that depending on what is available. In summary, we are a pump company. That is all that we do. Our customers think we are the best at it in the industry. We make very high-quality products. We do it in the United States. We do it with mostly U.S.-centric supply chains, which is a competitive advantage for us today. That diverse group of products is sold in numerous different markets, which provides a great deal of stability for the company. We have a wonderful dividend track record. We take care of shareholders well. We have done recently a very good job of growing both organically and inorganically.
We'd be happy to take questions if you have them about the company. I know I didn't cover it all.
Do you see any M&A opportunities? If yes, what specific areas do you have?
The question was, do we see M&A opportunities and what specific areas? Yet, we do see M&A opportunities. We've been a bit on the sidelines since acquiring Fill-Rite. Jim showed you the leverage picture. With it being down to 2.4 and continuing to fall, we've done a good job year-to-date of servicing that debt. I think through three quarters, paid down $45 million of it. If you drew that out on a trajectory, you might guess there's $60 million of it in a year. We'll see how that turns out. As we get to two or lower, yes, there are pump companies out there that will come to market. We know of a handful of them. We maintain a very active Rolodex, if you will. Jeff Gorman, our chairman, third generation of the Gorman family to lead the business, did a really solid job of establishing relationships.
I just finished a term as chairman of the Pump Industry Manufacturers Association. I've attempted and done, I think, a decent job of maintaining those relationships with Jeff's help. Yes, we'll have M&A opportunities. Where will they be? They'll be in the pump space. There'll be products that we don't make. We can innovate in the products that we make and gain market share pretty easily. I'll give you an example. Fill-Rite makes a rotary vane fuel transfer pump. Gorman-Rupp makes centrifugal fuel transfer pumps. Ours started at about 50 gallons a minute and up, and they're used for things like refueling aircraft. Fill-Rite's somewhere 35 gallons a minute down to about 3. You're used to about 8 gallons a minute at the pump when you fuel your car. We could have made a rotary vane fuel transfer pump.
We understand the technology, but we could not have taken Fill-Rite's market share. They have about 65% of that market with farmers and contractors. There are pump types out there that we do not make. Can we go make them? Yeah, our engineers are smart. They probably could go make them. Are we going to carve out the market share that another manufacturer has in that application? Probably not as easily as making a good acquisition. Some of that depends on what is available. One of the great parts about the industry is it is still very fragmented. It is an $80 billion industry. There are hundreds of pump companies out there. We are well known, but we are still less than 1% of the world's share. What becomes available? Timing will really dictate what the next acquisition looks like. We have some companies where we quote have first right of refusal.
We'll get a shot at it first because they're familiar with us. They know us. They know that as families, if they don't want to operate that business any longer, we're a good place for their employees to land and the legacy of the business to continue on in the community it operates in. What it specifically is, time will tell. Good question. Yes.
Outside of M&A, just from an organic standpoint, what's a good, if you can give your diverse in-market, what's a good organic growth strategy that historically has been important?
Question was outside of M&A, what's a good organic growth trajectory? There should be some price on an annual basis for sure. Historically, that's been about three. Unitary volume should be, if we're doing a good job of continuing to take market share, should be a couple more points, maybe two to four. There have been some times, let me make sure I get my years right, in 2022 and 2023, we had double-digit organic growth, 15% a year. Now, about half of that was price, right, each year because there was inflation. Thankfully, because of our U.S.-centric supply chain, because of the stability of the industry, because of our reputation, we've really never had pushback on price.
We're also trying to be, we're not the cheapest pump company in the world, but our customers know the value on the product, and so they often don't push back against that. It depends on economic conditions. Somebody else, yes?
What about valuations do businesses transact at?
Question was what valuations do businesses transact at within the industry? There have been some variation of that. Size is a big indicator of that. A smaller business could be eight to 10. Fill-Rite went at 13.2 plus a little bit more for a tax asset. That is about 12-13 for a sizable business with good margin profiles, probably about what things are going at. There have been some crazy things. Ingersoll Rand, I think, paid 19 X for Seepex in 2021. That seems a bit lofty, but their share price went up the day they announced it too. I do not know. It depends on the size, size is really the best indicator.
Is private equity rolling the business up?
Is private equity rolling the business up? Yes. There are PE participants in the pump industry and in the distribution. We anticipate that a number of those are getting a little long in the tooth. Probably will come to market in 2026. I don't know whether we'll be interested in, we won't be interested in all of them. That I can say for sure. Some of them we might be depending on the price and what condition they're in when they come to market. Yes?
Corporate governance, you mentioned the family's still involved in selling large shareholders.
Yes. Yeah, corporate governance is a question of the family's involvement. Jeff Gorman, third generation of the family, I'm sorry, is chairman of the board, and Jeff has decades of experience. We unfortunately lost his dad, Jim, only a year and a half ago. He was still active all the way up until COVID. Jeff Gorman and his sister together own about 20% of the shares. If you go past there and add employees and some others, we get pretty close to about 30% that are pretty closely held. We run it as a meritocracy. Our board has a great deal of independence. Our board makeup, we've got the retired CFO of Lincoln Electric, retired General Counsel of Smuckers. Don Bullock was Vice President of everything at Eaton for over his numerous years. Recently, Pam Hemminger joined us. She's Senior Vice President of purchasing from Caterpillar.
We kind of outkick our coverage in independent director representation, and they're a good influence on us these days. Yes?
You may have mentioned this, but what was the purchase price of Fill-Rite?
What was the purchase price of Fill-Rite was the question? $525 million, all cash. We explored other avenues. Could it be a mix of equity or something like that? Mr. Tuthill wanted all cash by May 31 of 2022. We got it done. Actually, with some help, the Fill-Rite management team, he was gracious enough to allow their management team to sit with our managing operators from numerous divisions. We told our guys, let them ask any question they want and tell them the truth. Show them where the warts are. Show them what's good. When Citi was shopping Fill-Rite, I think they gave the information to 56 interested parties. It came down to three, two strategics, one financial sponsor. We had to get to Mr. Tuthill's number, and we did.
Ultimately, won out because the Fill-Rite management team wanted to come with Gorman-Rupp, which is great. We've got about two and a half minutes left.
That should have been our intro.
Yeah. Other questions, folks? Certainly appreciate your attention. It's been all good questions.
You seem very U.S.-focused.
Sure.
Can you maybe just speak to that a little bit? Where do you see that long term? Is it international plans or how do you say what's going on right now?
Yeah, the question was about our U.S. focus and whether we want to maintain that or we have opportunities for growth worldwide. Only 25% of our sales are outside of the United States. We like doing business in North America. We like having U.S.-centric supply chains. That's been a real feather in our cap. As an example, Fill-Rite sales, 95% of them when we bought the business were to North America. We've helped them expand. They're selling into the Middle East today. They're selling into South America. They're beginning to sell into sub-Saharan Africa. We should continue to grow the portion of our sales internationally. That's not an easy thing to do, as you might imagine. Hey, we can do hard things. It's okay. What else? Yes?
Who is the largest industry competitor?
The largest pump company in the world is a company called Grundfos, which is owned by a foundation out of Denmark. There are some large pump companies that are publicly traded. Xylem has some pump assets within it. Pentair has some pump assets within it. Flowserve,
KSB out of Germany.
There are literally hundreds of pump companies out there. When we say, who do we compete with across those six brands that are across the bottom of the page that's up and all the products that we have, it's dozens and dozens of competitors. No single supplier represents more than 5% of our supply chain, if even 5%. No single distributor or customer represents even 5% of our business. It's an extremely diverse industry, product line, set of markets.
It's complex, but at the same time, it also has a lot of steadiness to it because of that makeup. All right, folks, I'm running out of time. Appreciate all of your attention. If you have questions, Jim and I are certainly happy to take them here. Thank you.